Consumer Brief

McLEAN, Va. (11/29/07)--If you plan to go somewhere for the holidays but haven't gotten around to making travel arrangements, you still might achieve that long-awaited getaway--for a price. You might have a tough time finding reasonably priced airline tickets, but a number of travel packages still are available to popular tourist destinations such as the Caribbean. New York also is a popular destination this year. The city will celebrate the 100th anniversary of the New Year's Eve ball drop in Times Square. And some cruise lines still are offering package deals for travel over the holidays. Websites to visit: http://www.tourscan.com, http://www.carnival.com, and http://www.marmara-manhattan.com (USA Today Nov. 16) ...

courtesy of cuna.org

Reduce tax bill next spring with simple tuneup now

WASHINGTON (11/28/07)--As 2007 draws to a close, it's time for a tuneup--a money tuneup, that is. Implementing simple tax planning strategies now could save you big bucks come tax time next year (Kiplinger.com Nov. 1).

A year-end tuneup is good advice for anyone, but it's particularly important if you've experienced a change in circumstances during the past year: marriage, divorce, death of a family member, job change, purchase or sale of a home or business, or other major event.

When it comes to reporting income and deductions, it's all about timing and techniques to reduce your overall tax bill. Not all techniques will be relevant to your situation, so seek the advice of a tax professional. And remember that some strategies won't reduce your taxes if you're subject to the alternative minimum tax (AMT).

• Prepay some 2008 bills now. You'll be able to write off the deduction earlier. Common examples include paying state income taxes or property taxes early, and paying your January 2008 mortgage bill before Dec. 31.
• Pad your retirement account. Employees can sock away up to $15,500 of pre-tax salary in a 401(k)--it grows tax-deferred until you withdraw it in retirement. Workers age 50 or older before the end of the year can contribute an additional $5,000 a year. And you can contribute $4,000 this year to an individual retirement account (IRA) or $5,000 if you're age 50 or older.
• Sell off loser investments. If you have significant capital gains in 2007, sell some losers and use that amount to offset capital gains (PR Newswire Nov. 7). If your losses are larger than your gains, deduct--up to $3,000 in any one year--the capital loss against other income, such as salary. Then carry over additional losses into subsequent years when you can use them to offset future capital gains.
• Energize it. There's still time before Dec. 31 this year to install energy-efficient storm windows and doors for a tax credit of 10% of the costs ($500 maximum credit), or a high-efficiency air conditioning system or water heater for a $300 tax credit ($500 lifetime cap). And there's a tax credit of 30% of the cost to install solar panels, solar water-heating equipment, or a fuel-cell power system in your home ($2,000 maximum credit).
• Buy classroom supplies. Teachers and teacher's aides can deduct up to $250 of the cost of certain items used in the classroom--books, supplies, software and other computer equipment. Hurry--this deduction expires at the end of the year unless Congress extends it.
• Spend down your health-care flex account. Not every company grants an extension to March 15, 2008, to spend 2007 flex dollars. The use-it-or-lose-it provision means unspent dollars go to waste, so schedule eye exams, prepay orthodontia bills and stock up on prescription and certain over-the-counter drugs. Check with your human resources department for a list of accepted charges.
• Keep receipts for charitable donations. All monetary contributions--regardless of the amount--now require documentation such as a canceled check or a receipt from the charity. New Internal Revenue Service rules went into effect in October 2006.

Finally, if you anticipate a large refund, consider cutting back on withholding, which will put more money in your paycheck now. Use Kiplinger's withholding calculator at Kiplinger.com/tools/withholding/ to run some numbers.

For more information, read "Credits and Deductions Save You Tax Dollars" and "Preparation Softens Blow of Alternative Minimum Tax" in Home & Family Finance Resource Center.

courtesy of cuna.org

Shrinking credit card float: One more reason to pay bills online

KANSAS CITY (11/27/07)--Call it the case of the shrinking grace period. Call it sinking the float. Call it deceptive. But whatever you call it, it's probably going to result in more consumers paying their credit card bills online (KansasCity.com Nov. 10).

More credit card issuers are shortening the grace period--the time in which you have to pay the bill before the interest-rate clock starts ticking--from 30 days or 25 days down to 20 days in some cases. That means your payment, if sent by snail mail, may not reach the issuer in time to avoid late payment penalties and possibly higher interest rates. Keep in mind, too, that you often rate a grace period only if you carry no balance.

With late fees climbing to all-time highs of around $39, and late payments triggering higher interest rates even on other forms of credit held by the card holder, consumers need to be on guard, monitor bills, and read the fine print on notices sent by issuers. Experts warn that some issuers hope you slip up and miss the due date, resulting in higher profits for them.

If you have a tendency to cut it short, there are two alternatives:

• Pay the bill when you get it. A 20-day grace period gets even shorter if it takes the bill two or three days to reach you.
• Pay the bill online. Avoid the snail mail shuffle that could cost you plenty in late fees and higher interest rates. Arrange for payment to be made two or three days before the due date and avoid the snail-mail shuffle altogether.

For more information, read, "Online Banking Makes Money Management Simple and Safe" in Home & Family Finance Resource Center.

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Weak passwords invite fraud

MADISON, Wis. (11/26/07)--Don't even think about shopping online this holiday season until you're sure you have a strong password. Without it, you unwittingly leave yourself open to identity theft, says the Credit Union National Association (CUNA) Center for Personal Finance.

If you're typical of many computer users, you have a weak password--one that's easy for hackers to crack. One example is any word in the dictionary; con artists have written software programs that search every word in the dictionary to uncover the key that can open your files.

Another no-no is using personal information, such as birthdays or names of family members and pets. And using consecutive keys on the keyboard, such as qwerty, is a gift that keeps on giving for identity thieves.

The key to a strong password, according to Microsoft, is to use a variety of characters and make it both random and lengthy. The greater the variety, the better:

• Combine letters, numbers and symbols. Each character you add increases your protection from fraud. A password without symbols needs to be considerably longer to have the same degree of protection as an eight-character password with symbols.
• Randomly capitalize some letters. Sprinkle them throughout your password.
  Stray from typical symbols. Don't forget about punctuation marks, slashes, dashes and brackets--symbols not on the upper row of your keyboard.
• Use a phrase or sentence to help you remember. Here's one example, "My #1 dog is a cross between Boxer/Lab," becomes the password "m#1diacbB/L." Remember this phrase and you won't forget this seemingly random combination of letters, numbers and symbols.
• Avoid easy-to-guess passwords. This includes your login name, sequences (123456789), or look-alike characters (M@ddie).

Finally, take time to check the strength of your password. Use Microsoft's online tool at Microsoft.com (search "password checker") to see how your password stacks up.

For more information, read, "Stay Safe When Shopping Online" in Home & Family Finance Resource Center.

courtesy of cuna.org

Figuring a safe withdrawal rate in retirement

McLEAN, Va. (11/19/07)--If you're close to retirement, you're probably crunching--or thinking about crunching--numbers to figure out how much money you can withdraw in retirement so you won't outlive your resources. But if you don't follow general guidelines, you may come up short (USA Today Nov. 9).

You don't know how long you're going to live, but you can count on this: Fixed income won't keep up with inflation, most individuals can't live on Social Security alone, and fewer than one of five retirees is drawing a corporate pension now--and that number is decreasing. With longer life spans, we need to spread our limited resources over a longer period of time.

What should you keep in mind when calculating a safe withdrawal rate?

• Life expectancy. Check the charts and add five or 10 years, taking into account your health and family history. Use this to determine how long you want your money to last.
• Don't ditch stocks in retirement. A recent study by T. Rowe Price came to the same conclusion as a study conducted by William Bengen, CFP (Journal of Financial Planning 1994) that analyzed historical data: The allocation mix that yields the greatest success at the time you start taking withdrawals is about 50% stocks and 50% bonds. Stock allocations less than 50% and more than 75%--either too conservative or too risky—are counterproductive.
• Start out small. If you want your money to last 30 years, studies reveal that you can withdraw 4% of your portfolio during your first year of retirement. A 3% or even 3.5% withdrawal rate is considered safest, while an initial 5% withdrawal is considered risky, and 6% or more is considered gambling with your nest egg.
• Use inflation to calculate subsequent withdrawals. After the first year, don't use the withdrawal rate to compute how much you withdraw. Rather, use last year's figure, plus an inflation factor.

For more information read, "Tapping Your Retirement Nest Egg," in Plan It: Retire Ready Toolkit.

courtesy of cuna.org